After another rally on Wall Street, Asian shares rose modestly while in Europe, investor sentiment deteriorated, with major indexes suffering losses during the last trading session of the week after a three-day rally. Despite hopes for further stimulus measures to combat its economic impact from the virus, market participants have once again focused on the spread of the disease across the globe.
Today, Hong Kong confirmed 65 new coronavirus cases – the biggest daily jump so far while Tokyo governor confirmed another 40 new coronavirus cases in the city. It is reported that Hong Kong is set to announce new measures to contain the virus outbreak. The United States is now the country with the most coronavirus cases, surpassing even China. Elsewhere, on top of the 25-billion-euro package now being discussed in Italy’s parliament, there are reports that the country may need new stimulus measures worth 30 billion euros.
Against this backdrop, UK’s FTSE 100 sheds 3.97 percent to 5,584, Italy’s FTSE MIB declines by 1.90 percent to 17,038. France’s CAC 40 sheds 2.65 percent to 4,422, while German DAX 30 loses 1.88 percent to 9,813. U.S. stock index futures point to a lower open following three straight days of gains ahead of the House's expected approval of a $2 trillion coronavirus relief bill. Dow Jones futures are down over 1%, as well as S&P 500 and Nasdaq futures.
On the data front, Italy March consumer confidence index arrived at 101.0 versus 100.5 expected and 110.9 in the previous month (revised from 111.4). The manufacturing confidence index came in at 89.5 versus 88.0 expected, while the economic sentiment indicator arrived at 81.7 versus 97.8 in February (revised from 99.8). According to the estimates from the Italian research house Prometeia, the country's GDP could contract by 6.5% this year.
Dismal data out of Italy coupled with some signs in USD recovery sent the euro down from the 200-DMA around 1.1080. As a result, EURUSD turned negative on the daily charts and could accelerate the bearish correction should the prices fail to hold above the 50-DMA. In the short term, the downside pressure remains limited so far. A lot will depend on the dollar demand, as further deterioration in risk sentiment could fuel the dollar safe-haven buying and thus bring the common currency lower after five days of gains in a row.
In other markets, oil prices remain under some pressure despite the recent comments from Russia. According to the latest reports, the head of the Russian Direct Investment Fund called for a new OPEC+ deal to stabilize the oil market and cushion the demand impact of the coronavirus outbreak. Meanwhile, the country’s Deputy Energy Minister Pavel Sorokin said that the OPEC and its allies remain in contact despite the fallout in the oil output cut policy in February. Still, Brent failed to attract demand on these comments and continued to trade below the $29 figure, suggesting the market doesn’t see any reasons for recovery.
Nathan Lambert, Head of Global FX Analytical Department